Is It Time to Refinance Your Mortgage?

Is It Time to Refinance Your Mortgage?

There are many good reasons to consider refinancing your mortgage, the primary reason being that interest rates are at an all-time low. With a refinance at today’s rates, you could lower your monthly payment, consolidate your debts, or even get cash from your home by tapping into the equity you’ve built up.

Norcom Mortgage offers a wide range of attractive mortgage refinance programs. We’ll help you to select the right program - one of our refinancing experts will sit down with you and show you how a refinance could save you money. There has never been a better time.

We will also tell you if we believe there is a net tangible benefit in refinancing at this time. We look at your home’s equity, your refinance goals, your interest rates and costs associated with obtaining the loan. Analyzing these factors helps us to determine whether a refinance is right for you.

Lower Mortgage Payments

One of the main reasons why homeowners choose to refinance is to lower their monthly mortgage payments.

When interest rates are very low, refinancing becomes a particularly appealing option. For a long time, the rule has been that if you can lower your interest rate by about 2 percentage points, it makes sense to refinance.

You have to keep in mind, however, that you'll pay additional fees to close on your new loan. We will evaluate those costs, as well as the potential difference between your old monthly payment and your new one, and determine how long it will take you to recoup the closing costs for your refinance. Please keep in mind total finance charges may be higher over the life of the loan.

Consolidate Debt

Refinancing your mortgage can give you the opportunity to consolidate your debts and save on interest costs.

Depending on how much equity you have in your home, you can refinance and get cash that you can then use to pay off other, higher-interest debts, like credit cards and other loans. When you roll all your debts into your mortgage, you can end up making one, low monthly payment, instead of several, and save on interest costs. Unlike the interest you pay on credit cards, or car loans and other types of loans, your mortgage interest is probably tax deductible. (Tax advisors can confirm this option for you.)

Draw on Your Equity

Each time you make a mortgage payment, a portion of that payment goes toward paying off your principal (the amount you originally borrowed.) As you pay off your principal, you build more and more equity in your home. Depending on the market conditions in your area, the value of your home may also have increased since you purchased it. Simply put, the difference between what you still owe on your mortgage and the current value of your home represents your equity in the home.

By refinancing your mortgage, you can draw on this equity to get money you can use for other purposes: home improvements, college tuition, buying a second home, debt consolidation, etc.

Keep Payments from Going Up

Many people opt for an Adjustable Rate Mortgage, or ARM. Typically, these types of mortgages offer a low, initial rate that adjusts to market conditions after a specified period. Many borrowers are attracted to ARMs, because their low initial rates can make home ownership more affordable.

If you have an ARM, and you’re concerned about potential interest rate changes that will increase your monthly payment, it may make sense to refinance.

So how do you decide if it’s time? There are a number of factors you should consider. For example, how long do you plan on staying in your home? If you have an ARM that’s fixed for 5 years, but you plan on moving before then, there’s really no need to refinance. If, however, you’re planning on staying beyond the 5-year time frame, then you might want to consider refinancing and getting a fixed-rate mortgage. Norcom offers 15, 20 and 30-year fixed rate mortgages.

If your down payment was less than 20% when you purchased your home, then you were probably required to get mortgage insurance. However, if you now have more than 20% in equity, built up through the payments that you’ve made and/or an increase in your home’s value, you may no longer require mortgage insurance. If that’s the case, refinancing could be a good way to eliminate this cost and lower your monthly payments.

Refinance an Investment Property

If you have an investment property, and you’re paying an interest rate that’s higher than current market rates, refinancing might be a good way to reduce your costs.

Refinancing an investment property could be a good way to cut your monthly expenses, increase the amount of monthly rent you can keep, and maximize the return on your investment.

If you refinance, you might also be able to draw on the equity you’ve built up in one investment property to finance the acquisition of another property, or other investment opportunities.